Public Bill Committee

[Mr. Christopher Chope in the Chair]

Further written evidence to be reported to the House

RESB 02 National Consumer Council

Clause 46

Stop notices

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: We have made fairly brisk progress so far. Let us see what today holds for us.
When we adjourned the other day, we were in the midst of discussing part 3 and had completed our debates on clause 45. Part 3 offers a new range of options to regulators as alternatives to criminal prosecution in order to ensure compliance. One important option, set out in clause 46, is the stop notice.
The stop notice would apply to situations in which there was an ongoing dangerous activity—for example, the leak of hazardous material on to land or water or in a factory. In such situations, the regulator would have to do exactly what it says on the tin and say stop. A stop notice would prohibit a business from carrying on the activity specified in the notice, and the notice would remain in place until the person had taken the steps specified in it.
Subsections (4) to (6) give the grounds for issuing a stop notice. They state that the notice may be issued only if the activity
“is causing, or presents a significant risk of causing, serious harm to...human health...the environment...including the health of animals”—
or the “financial interests of consumers”. The regulator must also “reasonably” believe that the activity as carried on by the business
“involves or is likely to involve the commission of a relevant offence”.
The provisions are important because they also allow the regulator to impose a notice when an offence has already been committed and if an offence is likely to happen. The Government believe that in certain circumstances a regulator should be able to issue a stop notice to prevent an offence from occurring if there is a risk to the public or the environment. Indeed, it would seem odd to instruct regulators to sit back and wait if they believed that that could happen.
Subsection (7) ensures that the steps specified to be taken in the notice must be limited to compliance steps. Given the sometimes onerous nature of stop notices we feel that it would be inappropriate to allow regulators to include broader steps in the notice.

Mark Prisk: I do not profess to be an expert on non-criminal sanctions, but will the Minister clarify whether the cases identified in subsection (4) mirror those of the stop notices currently available in law? The subsection has three specific provisions, and I want to be sure that there is no significant variance from established cases.

Patrick McFadden: I am happy to confirm that.
I was approaching the end of my remarks. I now conclude. Stop notices will be an important part of the regulator’s toolbox and will provide important protection for the public. Alongside the fixed and variable monetary penalties that we have already discussed, they have an important function.

Mark Prisk: I thought when the Minister began his speech that he was going to say it was a “Prisk” process, but it seems that we have made brisk progress. After that fourth-form attempt at humour, I shall move swiftly on.
Stop notices have considerable merit. The Minister rightly spoke of instances when immediate action is required and urgency is the essence. We have been assured that the cases are the same as under established stop notices. In principle, we have no problems with the use of the sanctions in those circumstances, although we will have questions about procedure when we discuss clause 47.

Lorely Burt: Welcome back to the Chair, Mr. Chope, to what may be the last day of our considerations.
On behalf of the National Consumer Council, I want the Minister to explore the nature of stop notices. The council is concerned that the test that the regulators must prove before issuing a stop notice is too high and that
“a significant risk of causing...serious harm”
is perhaps too high a barrier. I understand the grave importance to any business of having a stop notice issued against it. However, if an activity could be described as having a harmful consequence but not necessarily falling into a serious category, I am worried about how much leeway an individual inspector might have before issuing the stop notice.

Patrick McFadden: In some ways, the hon. Lady has answered her own question. As she rightly pointed out, subsection (4)(b) states that there is a case when
“the regulator reasonably believes that the activity as carried on by that person is causing, or presents a significant risk of causing, serious harm”.
The provision is onerous in some ways, but we are talking about serious and significant harm. The hon. Lady asked for an example. Hazardous material or toxic substances could be leaking on to land or into the environment, and of course that is serious. A stop notice being issued in those circumstances could mean that the business closes down completely until the problem is sorted out. If someone is wielding a power that can cause a business to close down, it is right that the threshold at which that happens should be high. That is why, in some ways, the threshold is higher for stop notices than for some other penalties under the Bill.
Stop notices will not be an everyday occurrence when a breach might have happened. I use the word subjectively—the breach could be minor, or it could be fixed with restorative action by the person or business concerned. There could be breaches of regulations that are not in themselves a danger to human health or the environment, so there could be another sanction in such circumstances. However, given the seriousness—I intend no pun—of stop notices, the use of the words “significant” and “serious” probably set the bar at the right level.

Question put and agreed to.

Clause 46 ordered to stand part of the Bill.

Clause 47

Stop notices: procedcure

Mark Prisk: I beg to move amendment No. 43, in clause 47, page 23, line 32, leave out ‘14’ and insert ‘7’.

Christopher Chope: With this it will be convenient to discuss amendment No. 51, in clause 47, page 23, line 32, leave out ‘within’ and insert
‘as quickly as possible and no later than’.

Mark Prisk: The amendment would change the current provision whereby a completion notice is issued within 14 days to within seven days of such an application. As we learnt in the debate on clause 46, stop notices are often used in urgent circumstances. The Minister referred to a possible chemical leak or something of that nature, and urgency is clearly at the heart of this form of sanction. Equally, it is often the case—in fact almost invariably—that compliance is evident. It is visible to the inspector and is usually fairly straightforward. In most circumstances, when one asks someone to stop doing something, it is reasonably straightforward to identify quickly that that has happened. Given that fact, 14 days seems a long period in which to issue a completion certificate. As I said, in most cases, it is fairly evident whether the activity has ceased.
When the situation is one of harm—the usual circumstances in which the stop notice is used—it is in the specific interests of the regulator to ensure that action is prompt as well. Therefore, there is a strong case for saying that 14 days is a very long period. That is why I think that seven days will be sufficient for the regulator to issue a completion certificate. Most cases involve attending a site, seeing that the activity or potential harm has been ceased, and thus being able to identify that directly.
I realise that there may be one or two incidents in which the regulator is not able to manage a particular series of incidents. However, those would be the exception. It is important that we send out the message that stop notices are for urgent issues and for ceasing specific activities. The regulator, therefore, should be able to issue the certificates in a similarly prompt manner. I hope the Minister will respond positively to an amendment that improves this part of the Bill.

Lorely Burt: Our amendment No. 51 is very much in the same spirit as the Conservative amendment No. 43. The difference is that our amendment acknowledges that there may be occasions when 14 days are necessary. Any arbitrary line that one draws will always have a problem one way or another. What is important about our amendment is that it emphasises the importance and urgency of making the decision as quickly as possible, and no later than 14 days. It keeps the 14-day deadline, but—like the Conservative amendment—it seeks to inject a note of urgency.
Closing a company for any period of time can be seriously harmful to its future. We wish to see those few words added to the clause so that no one can be under any illusion that it is very urgent—just as urgent as the issuing of the stop notice itself—to issue the other certificate as quickly as possible once there is compliance.

Patrick McFadden: I have a significant degree of sympathy with the points that have been made. The hon. Member for Hertford and Stortford said earlier in our proceedings that time is money, and he is right about that. Time is money for businesses and there should not be undue delay in responding to a request for a completion certificate to be issued. We are talking about a situation in which a person on whom a stop notice has been served may apply for a completion certificate and the regulator must decide whether to issue one within 14 days. The clause requires the regulator to issue a completion certificate once they are satisfied that the business has taken the steps specified in the stop notice. That allows the business to carry on its activity as before, with the problem having been rectified. I would expect that to happen as soon as is practical for the regulator. It is important that the Committee understands that 14 days is a maximum. The clause says “within 14 days”, so 14 days will not be the norm.
The procedure in clause 47(2)(e) allows a business to request a certificate from a regulator confirming its compliance. It is a safeguard intended to ensure the ongoing monitoring of the operation of the stop notice. The amendments suggest either a seven-day limit, or the insertion of extra words to ensure that 14 days is seen as a maximum. Although I understand the hon. Gentleman’s point—he is right to say that time is money—we believe that on some occasions it could cause difficulties. A seven-day limit might not always provide the regulator with sufficient time to assess fully whether a business has complied with the notice.
I will continue with the example that I used in relation to clause 46. A business might, for one reason or another, have been releasing some kind of toxic substance into the land. It could then have had a stop notice imposed on it for the leaking pipe that was emitting the waste, and the regulator might need to test whether the toxins had returned to an acceptable level, below which there was no danger to public health. In such a case, the regulator might have to wait for test results to be returned from a lab before it could confidently say that the business was complying. It might also have to contact a third party that might be involved, and ensure that that third party did not continue to suffer the harm that the original instance had caused to it.
I do not believe that such situations should be allowed to carry on for ever. There has to be a limit, which is why there is a limit in the Bill. A maximum limit of 14 days strikes the right balance between providing a safeguard for business, where time is money, and allowing regulators sufficient time to assess whether the business has complied.
Amendment No. 51 accepts the 14-day limit but seeks to add extra words. I have sympathy with that, but I do not feel that those extra words are needed to stress that 14 days is a maximum. The clause says “within 14 days”. Perhaps I can offer additional comfort to the hon. Member for Solihull, as I am happy to confirm that we will amend the guide to the Bill so that it states explicitly that 14 days is a maximum period, and that in practice we expect certificates to be issued as soon as possible within that.

Mark Prisk: I understand the toxicology issues, and the Minister has made important statements today that have not been made before. Clearly, there will be certain circumstances in which those toxicology studies will not be available for some time beyond 14 days. Can the Minister tell us, and those who might be affected by the legislation, what will happen in those circumstances?

Patrick McFadden: As I said, the process cannot be limitless as that would place the business in an unfair situation. A judgment must be made and we feel that 14 days strikes the right balance between allowing the regulator to do whatever tests are necessary, and not putting the business under a cloud of uncertainty or even a continuing state of closure. This is a judgment about how one strikes that balance. The hon. Gentleman feels that seven days is right, but we feel that 14 would cover more situations and that is our judgment.

Mark Prisk: This is a helpful debate. Presumably—to continue with the example we have been using—there would be no prohibition on the subsequent issuing by the regulatory authority in question of a stop notice, in the event of a subsequent leakage. Would there be an opportunity, therefore, if for example a delayed toxicology study were to be presented at 21 days, for the authority to issue a stop notice at that point?

Patrick McFadden: A stop notice could be issued twice, but as I have said it is an onerous sanction and not something that either the regulator or the business would want to go through repeatedly. The purpose of including an onerous option of that kind in the regulator’s toolkit is precisely to deal with those urgent and serious situations that we have discussed under clause 46, so the hon. Gentleman makes a fair point in saying that the process could be repeated, but we are trying to frame the stop notice procedure in such a way that problems will be dealt with by issuing one notice, dealing with the problem and moving on. That is the right way to tackle such a problem.

Mark Prisk: It is an extremely helpful debate. I am not quite sure why, but when the issue came up in the other place Ministers seemed either unable or unwilling to utter the words that the Minister has just said: that he sees the period as a maximum and that there is an expectation that the completion certificate will be issued well within that period. There is a dilemma, in the sense that I suspect that, if a need was seen for a late toxicology study to force a second stop notice, most businesses affected would regard it as much more onerous, because of the need to stop and restart a process that had been begun. I think therefore that there is a problem with that.
I am partly comforted by the Minister’s assurance—which I know will partly be coloured by later guidance to be issued by Ministers. We have clarified something that was not clear from the deliberations in the other place and made some welcome progress for businesses that have been concerned about the provision, several of which have contacted me directly. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lorely Burt: There is also my amendment.

Christopher Chope: I do not know whether the hon. Lady wanted to press her amendment, but she did not indicate that she did, and we take only the lead amendment in any grouping. All the others must be moved separately; otherwise they fall automatically.

Lorely Burt: No; I was inquiring only about seeking leave to withdraw it, so that is fine.

Christopher Chope: There is no need to withdraw an amendment that has not been proposed.

Clause 47 ordered to stand part of the Bill.

Clause 48

Stop notices: compensation

Mark Prisk: I beg to move amendment No. 56, in clause 48, page 24, line 15, at end insert ‘and any subsequent appeal.’.
The amendment would improve the current wording of subsection (1) of the clause, which is about compensation in relation to stop notices. Subsection (1) states:
“Provision under section 46 conferring power on a regulator to serve a stop notice on a person must include provision for the regulator to compensate the person for loss suffered as the result of the service of the notice.”
We want to insert at the end of that subsection the phrase, “and any subsequent appeal”.
The provision is designed principally to enable small businesses in particular to appeal without fear that they will not be able to recover costs simply because they wanted to challenge the notice in the first place. The Minister agreed in previous debates that no one in the relevant circumstances should be deterred from making representations or appealing—knowing that they would then be out of pocket. It is an important principle, and the Minister agreed to it in a previous debate. I do not want to make this a long debate, so I simply ask the Minister whether he now accepts that principle, and if so, whether he will accept the amendment. It is fair that there should be no circumstances in which someone who wishes to make an appeal is deterred by the fact that they will be out of pocket as a result.

Patrick McFadden: I am happy to confirm our earlier exchange about accepting the principle that the hon. Gentleman outlined. I can also give him the good news that the amendment is unnecessary because the situation that he is talking about is covered. As he rightly said, the clause includes provision for the regulator to compensate a person for losses suffered as a result of the service of the notice. That would include any period during an appeal when the notice was still in force. I understand the sentiments behind what the hon. Gentleman is trying to do in the amendment, but the clause requires the regulator to put in place a scheme to compensate a person for a loss suffered as a result of the service of the notice. I am happy to confirm that that would include ongoing losses suffered during an appeal when the notice was still in force. The amendment would therefore add nothing to the arrangements covered in the Bill.

Mark Prisk: I am fascinated. At least two lawyers from different organisations told me that there was a significant omission in the Bill and that it was important to have a provision to deal with that. In response to their comments, I felt that it was important to table the amendment. However, if the Minister is happy to confirm firmly on the record that there is a provision in the law, we have scored a goal without even starting the game. I am very happy if that is the case, not least because the Minister’s words are now firmly on the record. Although I suspect that we would all like the opportunity to divide the Committee to ensure that the issue is dealt with, there is no need. Therefore, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 48 ordered to stand part of the Bill.

Clause 49 ordered to stand part of the Bill.

Clause 50

Enforcement undertakings

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: Clause 50 takes us on to a slightly different issue from that of stop notices, which we have been discussing so far this morning. It comes at the issue of regulatory compliance from a slightly different angle. The clauses and amendments that we have discussed so far have dealt with the options available to a regulator to ensure compliance, and stop notices are part of that. Clause 50, however, offers an option to the regulated, rather than just the regulator.
The clause enables a Minister to make an order allowing a regulator to accept enforcement undertakings offered by a person or business subject to regulation. An enforcement undertaking is an undertaking or promise by a person or business to take certain actions. It is not something that can be imposed by the regulator, but an option that is available to a business that is found to be in contravention of the regulations. The clause takes forward a key recommendation of the review by Professor Richard Macrory and allows businesses to volunteer action to put right any harm that has been done.
Under subsection (1), the regulator may accept enforcement undertakings only when it has reasonable grounds for suspecting that an act or omission by a person constitutes a relevant offence. In practice, that is likely to mean that the business is offering undertakings during an investigation for an offence. Subsection (3) outlines the type of action that an undertaking must cover, which
“must be...action to secure that the offence does not continue or recur...action to secure that the position is, so far as possible, restored to what it would have been if the offence had not been committed...action (including the payment of a sum of money) to benefit any person affected by the offence, or...action of a prescribed description.”

Mark Prisk: Can the Minister confirm that, while the test of reasonableness is clearly set out in subsection (1), the principle of reasonableness would also be incorporated in the case of an action of securing a position that is to restore what would have been, had the offence not been committed?

Patrick McFadden: The regulator will have to judge, after an enforcement undertaking has been offered and if it has been accepted, that it has been complied with. The regulator must make a judgment. As I said, subsection (3) sets out the types of things that we are talking about. Subsection (4) provides that if an enforcement undertaking is accepted, the person may not be prosecuted for the offence, or have a fixed monetary penalty or discretionary requirement imposed on them, unless they fail or are deemed to have failed to comply with the undertakings.
We are saying that if a business, in the course of such an investigation, says, “These are the actions that we wish to take in order to put this matter right”, and it has come forward in such a way, it should benefit from doing so. There should be an incentive to do so, rather than its being placed in a situation where the option is available but if the business exercises it, it gets no benefit, because it is equally liable to all the other penalties that we have been talking about.
That is in a situation where there is compliance, but—a significant but—where a person fails to comply with their undertaking, the regulator will be able to prosecute the person for the original offence or impose a fixed monetary penalty or discretionary requirement. Subsection (5) enables the Minister to include further provision in the order, such as the procedure for entering into the enforcement undertaking, publication of the details, certification by the regulator that that has been complied with, and so on.
There is not a right of appeal against the enforcement undertaking itself, given that that is something volunteered by the person and not imposed on them by the regulator. We believe in allowing enforcement undertakings. We can envisage a reputable, well-intentioned business coming forward to exercise that option. The lack of compliance may be completely inadvertent. It may be that it did not know that it was not compliant, but it is something that it is more than happy to put right. That could be an important option available. It is something that was encouraged by Professor Macrory and is another important addition to the Bill.

Question put and agreed to.

Clause 50 ordered to stand part of the Bill.

Clause 51 ordered to stand part of the Bill.

Clause 52

Monetary penalties

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: I rise because clause 52 relates to a debate that we had earlier. The hon. Member for Hertford and Stortford asked about discounts, to which the clause relates. It might be helpful to the Committee if I outline what is covered here.
Clause 52 deals with the enforcement of monetary penalties. The clause allows the order made by the Minister under this part of the Bill to make provision for discounts for early payment of a monetary penalty and for the payment of interest as a financial penalty for late payment of the original penalty. However, the total amount of any late payment must not exceed the total amount of the penalty imposed—there is a limit on that.
I hesitate to use the parking fine analogy because the situations that these clauses deal with are significantly more important and on a greater scale, but the principle of early payment in such situations is one that we are all familiar with from that context. The Government believe that early payment discounts can be a helpful incentive to encourage businesses to comply promptly with fixed monetary penalties. Late payment penalties could provide a useful enforcement tool for regulators. We had a discussion the other day about the Companies House precedent and the potential for penalties for late filing. The Government also believe that if financial penalties are to be effective, there needs to be an enforcement process. Subsection (2) provides for the enforcement of unpaid penalties and any interest or late payment charges through the civil courts. It allows the order to create a more streamlined process accompanied by treating the penalty as if it were payable under a court order. In practice, that would mean that the regulator could skip the initial stages of registering a claim for the unpaid sum in the courts and then proceed more swiftly to enforcement action. The principle is one that we are familiar with: incentives to pay early and penalties for paying late.

Mark Prisk: I do not have a huge objection to the idea of early payment discounts, but the discount should not be so deep that it skews the system, such that many small businesses feel they should just pay up and move on. The danger is that the system would start to become imbalanced. The Minister has indicated previously, however, that businesses would not be at any disadvantage financially should they seek to challenge or make objections. My principal concern is to ensure that if someone wishes to challenge and question what has happened, they are able to do so and are not at any financial disadvantage.

Patrick McFadden: I absolutely understand the point that the hon. Gentleman is making and I agree with him about not being at a disadvantage if one pursues the processes that are outlined in the Bill. We had an exchange on this subject a few moments ago. He was keen to say to me that I had clarified what had not been clear in the Lords. I should make it clear that this is not a new change in the Bill; it is how the tribunal system will work under section 29 of the Tribunals, Courts and Enforcement Act 2007, which created first-tier tribunals. The tribunal has the power to award
“The costs of and incidental to”
any proceedings before it. That covers the point that the hon. Gentleman is making but it is not an addition to the Bill; it is actually already in place in that Act, which created the tribunals to which the appeals will be made.

Mark Prisk: I shall conclude my remarks by saying that we have probably exercised this issue up and down and in and out. On that basis, I shall not delay the Committee any further.

Question put and agreed to.

Clause 52 ordered to stand part of the Bill.

Clause 53 ordered to stand part of the Bill.

Clause 54

Appeals

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: It is important to pause on clause 54 because much reference was made during our debates here, but also in the other place, to the judicial protections for people who are subject to the regulations. Clause 54 requires that appeals under part 3 of the Bill must be heard by either the first-tier tribunal or another statutory tribunal specified by the Minister in the order made under that part. An appeal to such tribunals provides an important safeguard for businesses against the misuse of the civil sanctions. These tribunals are independent, impartial and highly qualified to review a regulator’s sanctioning decision.
Professor Macrory, to whom I have referred a lot, found in his report a number of advantages in routing appeals against the new sanctions to a specialist, expert tribunal, rather than to the courts. First, that will allow the criminal courts to concentrate on those issues that warrant prosecution rather than adjudicating on civil appeals. Secondly, tribunals can comprise members with legal and specialist expertise in the subject matter before the tribunal, thereby providing the tribunal on some occasions with a fuller understanding of the regulatory issues. In another part of my work, I am the Minister for employment relations, and have contact with the employment tribunals, where the role of these wing members, as they are sometimes referred to, or expert members, is often highly valuable. Regulatory cases could be concentrated through one tribunal under the first-tier tribunals heading as well, enabling expertise to be built up over time. For example, in the cases of regulatory non-compliance in magistrates courts, they make up less than 1 per cent. of all the cases, so it is difficult to provide specific training to magistrates and legal advisers for a field of law that, in percentage terms, is a small part of their work. This gives us the capacity to build up over time significant concentrated expertise.
We have talked about small businesses, and it is also the case that tribunals rather than courts may often encourage small businesses to exercise their rights of appeal without the need for expensive legal representation. As I said, our preferred venue for such appeals is the first tier of a tribunal, which is created by the Tribunals, Courts and Enforcement Act 2007. The first-tier tribunal will be launched later this year, and most existing tribunal jurisdictions, such as the transport tribunal, the information tribunal and the gambling appeals tribunal, will eventually transfer across to become part of this. These jurisdictions will be grouped together to form different chambers, and it is expected that a regulatory chamber will hear appeals against sanctions for regulatory non-compliance.
Most of the detail concerning composition, functions, procedures and powers and so on is contained in the 2007 Act rather than in this Bill, but I want to make it clear to the Committee that this is the vehicle that we see as dealing with appeals. The tribunal will have legal members who are professionally qualified in appropriate fields, and other experts. The composition of a tribunal for a particular field will be determined partly by statutory orders to be made by the Lord Chancellor, specifying qualifications and numbers, and partly by the senior president of tribunals and other judicial leaders. I should stress that regulators and their sponsoring Departments will not have any influence in such matters: the independence of the tribunal panel is further guaranteed by section (1) of the 2007 Act, which extends the courts’ statutory guarantee of independence under the Constitutional Reform Act 2005 to the tribunals.
There is an exception to all this in clause 54 (1)(b), which says that the appeal could be held by
“another tribunal created under an enactment.”
That is to take account of the fact that a number of statutory tribunals will not be transferring. The employment tribunals are a good example of that. They currently hear, for example, some health and safety appeals, so that is covered by subsection (1)(b). However, they have similar characteristics and safeguards to the first-tier tribunal.
Subsection (2) makes it clear that statutory tribunals only, not ordinary courts of law, can be specified. However, they have similar characteristics and safeguards to a first-tier tribunal. Subsection (3)(a) allows the Minister, when setting out the power, to make provision for the suspension of the effect of a fixed penalty or other requirement during an appeal. A person could apply for a stop notice to be suspended pending the result of an appeal. If that application is unsuccessful, the notice will remain in force during the appeal. However, should the person appeal, the effect of the stop notice can be automatically suspended until the result is known.
Subsection (3)(b) enables the Minister to make provision about the powers of the tribunal. Examples of those powers are set out in subsection (4), which details that the tribunal may
“withdraw the requirement or notice...confirm the requirement or notice...take such steps as the regulator could take in relation to the act”
or
“remit the decision...to the regulator”.
The Bill is not prescriptive about the powers of the tribunal, because a tribunal may have existing powers. Detailed rules governing the exercise of the powers will be provided in the tribunal procedural rules that will be made under existing provisions of other Acts—I have mentioned the Act that establishes such things.
The clause is an important part of the machinery. We have talked a lot in our debates on this part of the Bill about the different enforcement options available to regulators, such as fixed monetary penalties, variable monetary penalties, stop notices, restoration acts, restoration notices and so on. The rights of appeal that we are talking about to deal with the problem of judge and jury being one are set out in the clause.
I hope that is helpful in assuring members of the Committee that the measure is a robust and important part of the enforcement mechanism.

Mark Prisk: I am grateful to the Minister for those remarks. As he said, we have rehearsed the arguments as to whether the measure provides a sufficient protection as an appeal process in the absence of the ability of someone whom we might call the accused to refer their concerns to an ordinary court of law, so I do not propose to go over them again.
The clause permits appeals to be heard either by the first-tier tribunals, which the Minister explained at some length, although I still have a question. Subsection (1)(b also permits another statutory tribunal that Ministers can specify. The Minister alluded to the fact that there is some expectation that employment tribunals may participate, not least because they handle health and safety at work cases.
I have two separate but important questions. How significant a role does the Minister envisage for non-first-tier tribunals, which are alluded to in subsection (1)(b)? What estimate has his Department made of the costs of the appeals process and what budget has been put to one side for the first year, say, after the measure is launched?

Patrick McFadden: The hon. Gentleman’s first question relates to the proportion of cases dealt with by first-tier or other tribunals. The answer is that it depends on the jurisdiction. As I said, one of the advantages to business, regulators and everyone concerned is that hearing appeals through a tribunal can concentrate experience and work of that nature over time and build up expertise. However, when the jurisdiction is not dealt with by the first-tier tribunal but by an employment tribunal, the latter would deal with the process. Given that this is enabling legislation covering a significant degree of enactments, it is difficult for me to give the hon. Gentleman the percentages of first-tier and other tribunals. The answer to the question is that it will depend on the jurisdiction and the issue at heart; health and safety, for example, might be dealt with by other tribunals, other issues that we have talked about might not.
I may have to return to the hon. Gentleman with the answer to his question about the budgets that have been set aside. On costs, this is one of the parts of the Bill that I was referring to when I mentioned the impact assessment the other day. This part of the Bill is expected to give rise to the most significant savings to business. If memory serves me right, the savings on costs to business will be up to £80 million. In terms of the budget set aside to do the work, the answer may be shared between my Department and the Ministry of Justice, which is the lead Department for tribunals. I will come back to the hon. Gentleman on that, or write to him. I would prefer to do that rather than to give him a figure for the budget right now.

Question put and agreed to.

Clause 54 ordered to stand part of the Bill.

Clauses 55, 56 and 57 ordered to stand part of the Bill.

Clause 58

Consultation and consent: Scotland

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: The clause touches on an issue alluded to by my hon. Friend the Member for Glasgow, North the other day, so I thought that it might be worth setting out what we hope to achieve in the provision. My hon. Friend pointed out that the Procurator Fiscal Service and the Lord Advocate decide on prosecution matters in Scotland. The clause recognises that. It states:
“A Minister of the Crown must obtain the consent of the Lord Advocate before making an order under this Part in relation to an offence in Scotland.”
There are two issues involved: the legal issue and the devolution issue. I will deal with devolution first. Clause 56 is clear:
“An order under this Part may not, except for consequential purposes, make any provision which would be within the legislative competence of the Scottish Parliament if it were contained in an Act of that Parliament.”
We are familiar with the concepts of devolved and reserved matters.
Clause 58 requires that a Minister proposing to make an order affecting the prosecution of any offence in Scotland must obtain the agreement of the Lord Advocate. The Lord Advocate is responsible for prosecution in Scotland and should therefore consent to the proposed changes. Giving regulators civil sanction powers would remove that decision from the Lord Advocate, so we thought that it was absolutely right to put the provision into the Bill.
Subsection (2) requires a Minister proposing to make an order affecting the powers of a regulator that is a local authority in Scotland to consult Scottish Ministers.

Ann McKechin: Where a local authority in Scotland becomes the primary authority for a company that operates in other parts of the United Kingdom, what would be the procedure if the primary authority wanted to enforce action in some other part of the United Kingdom? Would the relevant Minister still be required to take the authority of the Lord Advocate or a Minister of the Scottish Executive, who have no function outwith Scotland? Will my hon. Friend clarify the position?

Patrick McFadden: It is important to note the difference between subsections (1) and (2). Subsection (1) concerns the Lord Advocate and action in Scotland; subsection (2) concerns the powers of local authorities as regulators. The situation to which my hon. Friend refers already exists in some cases under the home authority principle. My hon. Friend the Member for Dundee, West is not with us this morning, but my understanding is that Dundee city council is a home authority that has four operations that operate throughout the UK. That situation is already provided for.
Under subsection (2), if a Minister proposes to make an order that affects the power of a regulator that is a local authority in Scotland, he would be required to consult Scottish Ministers, because they obviously have an interest in the function of local authorities in Scotland. For the avoidance of doubt, subsection (3) defines the term “local authority in Scotland”. We have set out the application of the Bill in terms of both reserved and devolved functions, but in this clause we also set out important procedural matters that respect the position of the Lord Advocate in Scotland.

Question put and agreed to.

Clause 58 ordered to stand part of the Bill.

Clause 59 ordered to stand part of the Bill.

Clause 60

Consultation: general

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: We have heard a significant amount about consultation in the debate, and it is an important part of the requirements of the Bill. The clause relates to other clauses that we have discussed or will come on to. Subsection (1) states:
“Before making an order under this Part the relevant authority must consult the following...the regulator to which the order relates...such organisations as appear to the relevant authority to be representative of persons substantially affected by the proposals”.
That could be a business group, which may represent a number of small businesses or other such persons. It is important that consultation is part of the machinery for which we are legislating, and there is a broad definition under subsections (1)(a) to (c) of who should be consulted. That will rightly ensure a high level of public scrutiny of the decision to award a regulator new sanctioning powers.
If there are substantial changes to any part of the proposals as a result of the consultation exercise, subsection (2) requires the Minister to undertake further consultation on the revised proposals, as he considers appropriate.

Mark Prisk: Clause 60 is important and the process of consultation is essential if sanctions are to work as part of the Bill. Subsections (1)(c) and (2) are particularly important in the context of consumers. Quite understandably, we have discussed the principal relationships between regulator and regulatee, but it is important to recognise a third significant group—consumers. The Minister is nodding.
It is extremely important to ensure that the interests of consumer organisations, such as the National Consumer Council or the Consumers Association—better known as Which?—are included in the process as those organisations do an excellent job of representing consumers’ interests. They represent the interests of many of our constituents, so it is extremely important that the measure is not simply confined to a narrow relationship between the regulator and regulated—I think that is probably better English than regulatee; it is important that the provision goes further than that. We welcome that addition to the clause.

Question put and agreed to.

Clause 60 ordered to stand part of the Bill.

Clause 61 ordered to stand part of the Bill.

Clause 62

Offences under subordinate legislation

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: The clause extends the existing powers of the Minister to create criminal offences in secondary legislation under the powers to create alternative civil sanctions in this part of the Bill. It is important that clause 62 is read alongside the list of enactments in schedule 7. Subsection (4) limits the scope of the clause to the secondary legislation that can be made under the list of enactments in schedule 7. That means, for example, that a Minister creating, amending or consolidating criminal offences in secondary legislation made under one of those listed enactments may also provide for the offence to be sanctioned using the fixed monetary penalty.
Taken with clauses 36 to 38, and schedules 5 and 6, the clause will ensure that all relevant offences, whether created in primary or secondary legislation, can be dealt with through a civil sanction. That is important because it helps to ensure consistency across a particular regulatory regime.
The clause allows Ministers to confer only those powers in part 3. All the substantive restrictions will apply when the extended powers are used—for example, in relation to devolution.
Before making an order, the Minister must be satisfied that a regulator will exercise the powers in a manner that is in line with the principles of good regulation—the Committee will probably not want me to list them again. That is provided for in clause 66, to which we will come shortly.
Clause 62(3) provides that any order made under an enactment in schedule 7 giving the regulator access to the new civil sanctions will be subject to the affirmative procedure. That matches the parliamentary procedure for orders made under clause 36.
The clause is intended to ensure that the option that we are creating to use civil sanctions is available across primary and secondary legislation and across the regulatory regime.

Question put and agreed to.

Clause 62 ordered to stand part of the Bill.

Schedule 7 agreed to.

Clause 63

Guidance as to use of civil sanctions

Question proposed, That the clause stand part of the Bill.

Patrick McFadden: The clause is about guidance, and again the provisions are important. We are significantly changing the range of options available to regulators and the use of civil sanctions, and it is important that there is proper guidance on that.
The clause says that where the power to impose a civil sanction is conferred on a regulator
“the provision conferring the power must secure the results in subsection (2).”
That means that the regulator must publish guidance about its use of the sanction, that the guidance must contain the relevant information and that the regulator must revise it where appropriate, consult such persons as the provision may specify and have regard to the guidance or revised guidance in exercising its function.
On what we might call the penalty guidance, subsections (3) to (5) set out the specific requirements that the guidance must meet in relation to fixed penalties, discretionary requirements and stop notices. For example, regulators will be required to include details of how the penalties will be imposed and of those matters likely to be taken into consideration in determining the level of a variable monetary penalty.
We have talked about the powers and the need for consultation in putting together an order to confer them, but guidance on how those powers are to operate in practice is an equally important part of the regime, and that is covered in clause 63.

Mark Prisk: As the Minister said, clauses 63 and 64—I am looking principally at clause 63—refer to what should be in the guidance. I have two brief questions for the Minister. First, when would the guidance be published? It is always important for businesses to understand that. Secondly, how is it to be made accessible to affected persons? The provisions will affect a wide section of the business community, so it is important to understand how the Government intend to ensure that business is properly informed in a timely way.

Patrick McFadden: The answer to the hon. Gentleman’s question about when the guidance will be published is that we have codes on such things. Our intention would be to publish guidance 12 weeks before the proposals came into effect. That should give people adequate warning of what is involved.
More generally, the hon. Gentleman is right to say that guidance is important. Sometimes businesses pay outside consultants to help them to comply with regulation or a change introduced by the Government. Obviously, we recognise that that happens, but we do not want businesses to do it unless they have to, so we put significant effort into improving guidance.
Let me give an example. The Government have put significant effort into improving the “Employing people” pages of the Business Link website. They are a very good guide for businesses so that they do not have to spend what are sometimes significant sums asking people how they should comply with the law when that information could be made available for free and, we hope, in an accessible and user-friendly way by the Government. The hon. Gentleman is therefore right to stress the importance of guidance, and we do put effort into improving it. We envisage such guidance being available on a regulator’s website, so that a business in that field could check what was expected of it. That is right and fair, and that is what we hope that regulators would do under this provision.

Question put and agreed to.

Clause 63 ordered to stand part of the Bill.

Clause 64 ordered to stand part of the Bill.

Clause 65

Publication of enforcement action

Question proposed, That the clause stand part of the Bill.

David Kidney: It is a pleasure to serve under your firm but fair direction of our proceedings, Mr. Chope. I have some questions for my hon. Friend the Minister. The clause relates to the publication of information on enforcement action in respect of the new civil sanctions. What is the purpose behind the clause? It strikes me that it is one of two things. One possible explanation is that it constitutes a name-and-shame policy for people on whom civil sanctions are imposed. The second explanation is that it is about accountability: people who impose the new civil sanctions have to account for how many they have imposed and whether they are collecting moneys efficiently, so that there is information on which the public can judge them. To me, the second explanation is far more satisfactory.
The reason why I thought that the first explanation might apply is that this morning I woke up to the news that from today the Border and Immigration Agency will, under a naming-and-shaming policy, publish the names of employers who employ illegal immigrants. It therefore occurred to me that the Minister might say that that is his purpose in this case.
The important point about the second purpose—collecting the information and knowing whether the system is effective—is that under subsection (2) some information has to be published, but it is partial. The information that a civil sanction has been imposed should be collected, but not necessarily the information that the matter has come to a successful conclusion. Under subsection (2)(b), for some of the fixed monetary penalty cases, it will be reported that the penalties have been paid, but that will not necessarily happen for all of them. That is my reading of the provision. It is therefore possible that we would never know the true extent of the power and whether it was successful. I conclude that we might never know its effectiveness if we were thinking back to the time when magistrates courts were imposing many fines but apparently not collecting them successfully. The collection rate was appalling. That fact would be very important for public interest in whether the sanctions were any use. However, because of the way in which the clause is drawn, I do not think that we would have that information.
The provision also seems incomplete because of subsection (3), which states that if there is a successful appeal against a civil sanction, that information does not have to be collected and reported. If one is asking about the effectiveness of the overall system, one has to ask why that is, because it is a relevant fact that in many cases there would be a successful appeal against the civil sanction. We would want to know that fact, and it should be published, because it would lead to questions being asked about the alacrity with which civil sanctions were being imposed but overturned on appeal. It would be important to have that information; it should not be excluded.
Subsection (4) is the most worrying of all. It says that the information need not be collected and published
“where the relevant authority considers that it would be inappropriate to do so.”
That sounds as though a local authority, as a regulator, could decide not to collect information because it was inappropriate to do so or to collect some information about some cases but not others, which would lead to an undermining of the use of the statistical evidence. That seems to hole the entire clause below the waterline. I looked at the explanatory notes for guidance, but found that they muddied the waters even further instead of solving the problem.
Paragraph 170 reminds us that the reports may not need to list certain cases. “Certain cases” suggest that it is one or two and not the whole lot, but the clause is so broadly drawn that the regulator could decide that all the cases were inappropriate to be publicised. The clause says that cases need not be listed
“where the Minister thinks it inappropriate for such cases to be publicised, for example, for data protection reasons.”
If I am right and the purpose is to compile statistical information, data protection would not apply because we would not be disclosing information about individual cases.
Why do the explanatory notes mention the Minister? The Bill says that the “relevant authority” makes the decision. Either the Bill or the explanatory notes is wrong. The Minister needs to tell us the purpose of the clause—he was about to rise to do so before I interrupted him, so I apologise for that—and whether he is satisfied that the Bill has been drawn sufficiently carefully on this occasion.

Patrick McFadden: I am extremely grateful to my hon. Friend for asking me that series of questions, which will allow me to elucidate on the rationale behind the clause. Hopefully, I can give him some answers. He asked several questions, including whether the purpose of the clause was accountability or letting the public know who had contravened. It is a bit of both. It is right that regulators, who are being given a significant new sweep of powers under this part of the Bill, publish information about how they are exercising those powers. That is a good in itself. As to naming and shaming, there can also be a public interest in knowing whether an organisation has contravened and has reached the end of the process. We can go back to the example of a business releasing toxic waste into the environment. I do not know why the public should not know about a business that has been found guilty of such an offence, has received a civil sanction—it may have appealed but has not been successful—and has reached the end of the process.
My hon. Friend then asked, why exempt those on appeal? That issue has arisen in other Bills as well. Is it in the public interest to know when charges have been levied but the person has not been found guilty in the end? There is a reputational issue at stake for business. We have talked about appeal processes in the context of the Bill. The regulator may impose a civil penalty, but the penalty gets overturned on appeal because the regulator was wrong. In those circumstances, is it fair for the business to be named in the report? In the end, when the process has been completed, the business has not been found guilty of anything. Therefore, subsection (3) is fair.

David Kidney: I guessed that my hon. Friend might say that it was a bit of both, but does he not think that that is confusing? If there were lots of civil sanctions being imposed and they were all being overturned on appeal, there would be a cause for public concern. If the Bill exempts publication of information about cases because they were successfully appealed, we would not know about that concern.

Patrick McFadden: My concern is with reputational fairness for the business. I do not think that saying that it is a bit of both is a bad thing. There is a perfectly fair dual purpose to publishing information. It will show those looking at the regulator how the regulator is using the new suite of powers, and it will serve the public interest to know about those who have contravened the regulations. That can be fair, provided it has reached the end of the process.
The point that my hon. Friend is making is, in a sense, a generic one. It has been raised in other situations. My Department has sometimes been asked, “Shouldn’t those accused of something be named on some list, even if it isn’t proven?” I am not sure that that is fair. Subsection (3) is intended to deal with that situation.
My hon. Friend’s final question concerns subsection (4) and the phrase,
“where the relevant authority considers that it would be inappropriate to do so”.
I should make it clear that the relevant authority and the Minister are the same thing under that provision. The relevant authority will not be the regulator. Subsection (4) will allow the Minister to exempt certain cases from the publicity requirement, and is intended to capture cases that may have data protection implications or other grounds for exemption.
I must be careful how I put that. What other grounds might there be for exemption from the requirement to publish information about enforcement action? The regulated person or business may be in a particularly sensitive area. It may be that if information about the address of the premises came into the public domain, it could be a danger to those working there. I know that we can think of examples where that might be the case. There are some among the population who object fiercely to some business activities, research activities and so on, so it is prudent to give the Minister the power to say in those circumstances, “We don’t want that information released, because we could be putting someone at risk by publishing it.”

David Kidney: I apologise for missing the fact that the relevant authority is the Minister; my hon. Friend is quite right. In the kind of case that he described, it is perfectly understandable that a Minister might want to direct that such information should not be published—certainly information such as people’s names, addresses and so on. Does my hon. Friend agree that that would happen in exceptional situations rather than simply inappropriate ones? Will he reflect that “inappropriate” is quite a wide test for the power, and that something such as “exceptional circumstances” would be more narrowly focused?

Patrick McFadden: We could have a discussion about “exceptional” and “inappropriate”. We agree that regulators should not be exempted from the duty for frivolous reasons. “Exceptional circumstances” might take it too far. It could cause a regulator difficulties in cases where strong data protection reasons exist for not disclosing enforcement action but the case is not seen as exceptional. We could argue about the specific term, but on data protection grounds and grounds of safety for those involved in the enterprise, we think that the provision in subsection (4) is a prudent part of the Bill’s information release function.

Mark Prisk: This has been a useful debate. The hon. Member for Stafford rightly raised questions, which the Minister has delicately answered, about inappropriateness. I do not wish to stretch it too far, but does the Minister agree that although it might be helpful if the word “inappropriate” remained in the Bill, it would also be helpful if it were understood that it is the Government’s expectation that the matter would not be regarded as routine?

Patrick McFadden: That is a perfectly fair point.

Question put and agreed to.

Clause 65 ordered to stand part of the Bill.

Clause 66

Compliance with regulatory principles

Mark Prisk: I beg to move amendment No. 45, in clause 66, page 32, line 6, at end add—
‘(2) Where the regulator is a local authority or authorities, prior to the provision being made the relevant authority shall consult the LBRO as to whether the authority or authorities are fully compliant with the said principles and will continue to act in accordance with those principles.
(3) Notwithstanding subsection (2), the relevant authority may proceed to make the provision in subsection (1) with the condition that the LBRO is satisfied that any authority that is not fully compliant will become fully compliant within one year of the provision being made.’.

Christopher Chope: With this it will be convenient to discuss new clause 3—Duty to secure observance of Code of Practice—
‘Where any local authority has been granted powers under Part 3 of this Act, the LBRO shall have the duty or reviewing and, if appropriate, certifying every three years whether local authorities are compliant with the provisions of any Code issued under Section 22 of the Legislative and Regulatory Reform Act 2006.’.

Mark Prisk: I want the new clause to be regarded as a distinct element. If the Minister embraces both proposals warmly, the matter will be resolved, but if not, we may wish to press them to a Division. It would be appropriate to hear his response, but we might wish to deal with new clause 3 separately.
Amendment No. 45 would insert two subsections into the clause. It relates to local authorities, and it would reinforce the need for all regulators to be fully compliant with the Hampton principles. We have debated them, so I shall not rehearse them now. The amendment stems, as does new clause 3, from worries that have been expressed by business. I am particularly grateful to the British Retail Consortium for bringing the issue to my attention. It is worried that this part of the Bill does not explicitly state roots in the Hampton principles, and it wants consistency in the compliance of regulations with those principles. It says that not only when regulators begin their process should they be seen to be compliant, but that there should be a process by which that is made consistent throughout their operation.
The amendment would provide the Government with a compromise. It would allow the powers to proceed as the clause envisages, even if some authorities are not currently compliant. It would give the Local Better Regulation Office a role to ensure that such authorities become compliant in a year. It would make sure of the opportunity to achieve Hampton compliance. We can all think of local authorities that may achieve that at a particular point, but we believe in the principles and want the whole system to be skewed towards ensuring that the maximum number of authorities are compliant, and thus able to participate.
New clause 3 would ensure that other regulators who can use the administrative penalties are also consistently compliant with the Hampton principles. As the Minister knows, the Macrory report was clear that the use of administrative penalties should only be for regulators who are consistently compliant. As drafted, the Bill does not seem to secure ongoing compliance. It requires an assessment prior to the first allocation of the powers, but not thereafter. It may well be that with the vast range of resources behind him, the hon. Gentleman can identify the fact that such a provision is embedded in another part of the Bill. Unless he can show that a consistent compliance provision exists, the new clause would strengthen the Bill’s Hampton credentials. Consistency is just as important as being compliant at the beginning, so if I may I shall move the amendment and new clause 3.

Christopher Chope: We shall come to new clause 3 formally later, but we can debate the two provisions together now.

Lorely Burt: I agree with the sentiment behind the new clause. So many companies will feel frustration if they are encumbered with a local authority that is not working within the spirit and the law of the Hampton principles. The new clause would give the LBRO auditing powers to see that local authorities comply with the Hampton principles and the ability to certify them as compliant every three years. I should be grateful if the Minister would elucidate on whether such matters are catered for elsewhere in the Bill or whether the proposal would introduce something new that would be helpful.

It being twenty-five minutes past Ten o’clock, The Chairmanadjourned the Committee without Question put, pursuant to the Standing Order.

Adjourned till this day at One o’clock.